Ghana wants to trade its gold for oil

The government reached an agreement “temporary” with the Dubai-based Emirates National Oil Company (ENOC), said Kabiru Maha, Economic Adviser to Ghana’s Vice President Mahamudu Bawumia.

Ghana, Africa’s second-largest gold producer, last week asked major mining companies to sell off 1.^Eh January 20% of the metal it will process to build bullion reserves, which will be used for fuel imports and to reduce demand for the dollar after its currency has fallen 57% this year.

“We are open to any international oil trading company that is interested in Maha said in a Nov. 25 phone interview. From October 2023, all of our petroleum needs will shift to gold. »

ENOC has yet to comment on this agreement with Ghana.

Ghana is struggling to stabilize its economy and sees the barter system as a way to stem the decline of the cedi, among the world’s worst-performing currencies tracked by Bloomberg. A weakening of the cedi leads to inflation and reduces the country’s foreign exchange reserves. President Nana Akufo-Addo’s government, which has lost access to international financial markets this year due to debt and loan servicing costs, plans to ask international bondholders to accept losses on their investments to pave the way for international currency bailouts. Fund (IMF).

From government to government

Dubai has long been associated with the gold trade. But the United Arab Emirates (UAE) is regularly suspected of money laundering because of regulatory loopholes that would allow it to import bullion smuggled from war zones, accusations denied by Dubai, which insists that gold trading is on from 2021. A country’s anti-money laundering reporting system operated by the federal government.

“ENOC wants to give us refined oil for gold, Steve Opata, Head of Financial Markets at the Bank of Ghana, said in an interview on Monday (November 28). Depending on the amount they agree to, we will give them the equivalent in gold. It is a program between Govt. »

Ghana spends about $10 billion (€9.63 billion) a year on imports, of which 48% is on fuel purchases. The government hopes that swapping gold for refined crude will help it replenish total international reserves, which fell to $6.7 billion at the end of October, barely covering 2.9 months of imports, from $10.8 billion a year earlier.

The fall of the currency led to an acceleration of inflation, which reached 40.4% in October. This prompted the central bank to raise borrowing costs by 250 basis points to 27%, the highest rate in nineteen years.

The Bank of Ghana will buy gold from mining companies in cedis. Ghana began buying gold last year for the first time in sixty years to bolster its foreign exchange reserves. This latest measure aims to increase these purchases. “If we implement it as planned, it will fundamentally change our balance of payments.” Mr. Baumia announced this in a Facebook post. Dollar demand from oil importers “Dwindling foreign reserves are faced with a devaluation of the cedi and an increase in the cost of living with higher prices for fuel, transport and utilities.”he added.